This article provides a thorough explanation of Shopify Payments, including its overview, advantages, disadvantages, and setup method.

Hello, I’m Kanahina☆

Today, I’ll take a deep dive into Shopify Payments.

I work in the e-commerce division of a web production company and use Shopify every day.
I have also been selected as a Shopify Expert, a status held by fewer than about 90 companies in Japan, so I believe I can share practical, experience-based insights with you 😊

What Is Shopify Payments?

Shopify Payments is the official payment method provided by Shopify.
It allows online store owners to accept credit card payments and other payment methods directly within Shopify without introducing an external payment service.
Shopify Payments can be enabled easily from the admin settings with just a few clicks, and changes can be reflected immediately without special technical knowledge. (JCB cards are not available immediately.)

With many standard e-commerce services, it often takes time to pass screening before credit card payments can be introduced, so this is one of Shopify’s strengths 😊

What payment methods can actually be used?

Specifically,
Visa, Mastercard, American Express, JCB, Diners Club, Discover, Apple Pay, and Google Pay can be used once they are configured from the admin screen.
*JCB cannot be used immediately.
*Once JCB is introduced, Diners Club and Discover can also be accepted automatically.

How it differs from other payment methods

Many e-commerce services require the introduction of an external payment system.
This includes third-party services such as PayPal and Stripe.
These services are certainly reliable and are used by many stores, but they often require extra work for setup and management.
In that respect, Shopify has many advantages because you can get started quickly, and I always feel that it makes business operations smoother.

Another major advantage of Shopify Payments is its integration.
It is extremely appealing that all payment-related management can be handled centrally inside the Shopify dashboard without introducing an external service.
This makes troubleshooting payment issues, processing refunds, and checking reports much easier.

Compared with other payment methods, Shopify Payments also has relatively low fees.
In particular, the higher the Shopify plan a store owner uses, the lower the payment processing fees become.

That said, it is not perfect in every way.
Shopify Payments also has some disadvantages. I’ll explain those in detail in the sections below.
First, I’ll cover the advantages, then move on to the disadvantages 😊

Advantages of Shopify Payments

To make an online store successful, the quality of the purchasing experience is extremely important.
At the center of that experience are a smooth and reliable payment process.
Shopify Payments offers many advantages that meet these requirements.

Advantages in terms of fees

Many payment services charge a certain fee for each transaction.
This can become a significant cost, especially for stores with high transaction volume or high order values.

Even on the lowest Basic plan, Shopify Payments has a relatively low fee of 3.4% for Visa and Mastercard.
Considering that free e-commerce services such as BASE can charge around 6%, Shopify’s fee setting is inexpensive. There is also no separate monthly payment fee, which makes it very cost-effective.

By using a higher plan, these fees can be reduced even further.
This can improve profit margins and make more competitive pricing possible, so it is a good idea to upgrade your plan according to your sales goals 😊

That said, most clients start with the lowest Basic plan at first!

Seamless integration: everything is completed within the Shopify platform

When using an external payment service, many settings and management tasks are required.
However, Shopify Payments is completed entirely within the Shopify platform, so that kind of extra work is unnecessary!!

Customers can complete the purchase process seamlessly without being redirected to a third-party page.
This can also help improve the purchase conversion rate.
Store owners can also manage and track payment-related information easily from the Shopify dashboard. It’s nice not to have yet another admin screen to manage 😊

Strengths in security

For online payments, the safety of customers’ credit card information and personal information is the highest priority.
Shopify Payments uses industry-standard security technology and provides strong protection for customer information.

Because it meets the very high security standard known as PCI DSS, users can shop with confidence.
It also provides functions and tools to minimize the risk of fraudulent transactions.
This allows store owners to reduce security risks and focus on running their business.
Older e-commerce services did not always include fraud analysis, but with Shopify, the risk of fraudulent orders is shown for each order in the admin screen, which is very helpful when store owners need to make decisions.
If a high-level alert appears, it is generally safer to cancel the order. When I advise clients, I also recommend contacting the customer and canceling the order when the risk level is high.

Disadvantages of Shopify Payments

Restrictions on available countries and regions

Shopify Payments is used around the world, but unfortunately it is not available in every country or region.
In some countries and regions, regulations, laws, or infrastructure issues may make it difficult to introduce Shopify Payments.
This can become an obstacle for store owners considering expansion into specific markets, so if you are thinking about cross-border e-commerce, be sure to check whether there are countries where it cannot be used.

As of May 2023, it was available in only the following 23 countries and regions.

Australia
Austria
Belgium
Canada
Czechia
Denmark
Finland
France
Germany
Hong Kong SAR
Ireland
Italy
Japan
Netherlands
New Zealand
Portugal
Romania
Singapore
Spain
Sweden
Switzerland
United Kingdom
United States

For the latest information, please check the official Shopify website.

Restrictions for certain industries and products

In addition, Shopify Payments does not support every industry or product category.
Use of Shopify Payments may be restricted for certain high-risk industries or product categories that are subject to strict regulations.

For example, adult products, certain health foods, expensive jewelry, art pieces, and other specific categories may be excluded from Shopify Payments.
For details, please see this page on Shopify’s official website.

Fee issues: costs when refunding or canceling orders

Another disadvantage of Shopify Payments is the cost that can occur when refunding or canceling an order.
Specifically, if a refund or cancellation occurs after a product sale has been finalized, the fees related to that transaction are not returned.

For example, if a high-priced product is sold and later canceled, the transaction fee becomes a cost borne by the store owner.
This can be a major disadvantage for stores that handle expensive products or operate in industries with many returns or cancellations, so it is worth considering your product prices and cancellation rate.
However, Shopify also offers a manual capture mode that does not automatically finalize sales after a credit card payment. This means the store owner can review the order after the customer pays and then decide whether to capture the payment, which can reduce the risk somewhat.

How to Set Up Shopify Payments

When opening an online store, setting up payment processing is one of the steps you cannot avoid.
Unlike external payment services, Shopify Payments makes this process easy to complete.

Below is a step-by-step guide to setting up Shopify Payments.

(1) Create a Shopify account

First, visit the official Shopify website and create an account.
Enter the required information and open your account.

(2) Access the admin screen

After creating your account, log in to the Shopify admin screen.
Click “Settings” from the dashboard, then select “Payments.”

(3) Select Shopify Payments

In the “Payments” section, click the “Manage” text for Shopify Payments to move to the detailed settings screen, then enter the required information.
You will find settings such as card brand selection, payout timing, and fraud prevention settings.

(4) Enter and save the required information

Next, click the “Complete account setup” button and enter information about your business and bank account details.
This sets up where your sales proceeds will be deposited.

(5) Choose how payments are captured

Finally, choose whether payments are captured “manually” or “automatically.”
Manual capture means that when a user purchases with a credit card, the payment amount is not finalized immediately; instead, the store owner manually captures the amount later.
The major advantage of this mode is that if there is a fraudulent order or an order placed by mistake, you can cancel it without being charged a cancellation fee.

In contrast, automatic capture means that the payment amount is finalized at the moment the user purchases by credit card. This removes the need for the store owner to capture the payment manually, but even if the order is fraudulent or mistaken, the payment has already been captured, so the fee will not be returned even if the order is canceled.

If the store has only a small number of orders and is not using apps such as warehouse integration, I usually advise clients to start with manual mode.
There are surprisingly many “high-level fraudulent orders,” so I personally think it is better to start the shop while monitoring orders manually.

Once all settings are complete, I recommend using test mode to confirm that the actual payment process works properly.
This helps minimize the risk of problems occurring when real customers make purchases 😊

Tips for Making the Most of Shopify Payments

Shopify Payments is supported by many store owners because it is easy to introduce and integrates with the admin screen.
However, there are also disadvantages, such as the need to choose a plan according to sales volume and the possibility of cancellation fees. To use the function to its fullest, it is helpful to know a few tips and techniques.

Advice from Kanahina 😊

Check your fee plan

Shopify Payments fees differ depending on the Shopify plan you use.
By choosing a higher plan, you can reduce credit card transaction fees per order, so choose the most suitable plan based on your transaction volume.

Monitor fraudulent transactions

If fraudulent transactions occur, additional fees or penalties may be charged.
Shopify has built-in tools for detecting fraudulent transactions, so use them to minimize risk.
In general, it is better to cancel orders marked as “high-level” fraud risk. If an order is placed with a fraudulent card and a chargeback occurs, the worst-case scenario is that you have already shipped the product but do not receive the payment.

Chargeback
A chargeback is when a credit card company cancels a sale because the cardholder does not agree to pay the charge due to reasons such as unauthorized use.

Clarify your refund policy

If refunds and cancellations happen frequently, fees may occur each time.
By clearly stating your refund policy and informing users in advance, you can reduce casual cancellation requests and lower the possibility of cancellations and refunds.

Techniques for improving the user experience

A fast payment process

Compared with Japanese e-commerce services, I feel that Shopify requires fewer fields during checkout.
Also, in October 2023, the checkout screen, which had previously been split across three pages, was consolidated into one page, so I feel that payment has become even smoother!

Offer a variety of payment methods

In addition to Shopify Payments, Google Pay, Apple Pay, and Shop Pay, which is related to Shopify, can be added from the Shopify Payments settings screen. By using these payment methods together, you can increase users’ choices and lower the barrier to purchase.
Other external payment methods such as Amazon Pay, PayPay, and convenience store payments can also be introduced.

Strengthen security

To earn users’ trust, securing strong security is absolutely essential.
Shopify of course includes an SSL certificate, and by clearly displaying security-related information in your store, you can increase customer confidence.

Above all, Shopify has obtained PCI DSS Level 1 compliance.
PCI DSS is the global credit card industry standard for safely handling customers’ credit card information, and Level 1 provides security comparable to that of financial institutions.

I read in Shopify-related articles that not many companies in Japan have obtained PCI DSS Level 1, so it is surprising that this level of security can be prepared for around $300 per year.

As a web director, I want my clients to operate their stores in the safest possible environment, so I end up strongly recommending Shopify 😊

Summary

Many elements are involved in running an online store, and payment processing is one of the most important.
Day by day, I feel that Shopify Payments is supported by many store owners as a powerful tool for handling this payment process smoothly.
With domestic services, introducing credit card payments can involve quite a bit of paperwork and effort, so Shopify Payments really is easy because it can be introduced quickly!

Overall evaluation of Shopify Payments

The greatest appeal of Shopify Payments is its simplicity and integration.
A payment process completed entirely within the Shopify platform, without introducing an external payment service, is extremely convenient for store owners.

The advantages in terms of fees and the strengths in security are also major points in its favor.

On the other hand, there are disadvantages, including restrictions on available countries and regions, restrictions for certain industries and products, and fee issues when refunds or cancellations occur.

Taking these points together, I think it is best to decide whether to use Shopify Payments after considering the products you handle, your cancellation rate, and related factors.

In my view, Shopify Payments may not be suitable for very expensive products (¥500,000 to several million yen) with a high cancellation rate. (If a payment has already been captured and then canceled, the fee is not returned.)
For cases other than that, I think Shopify Payments is a very effective payment method with many advantages.

Final advice for store owners

The success of an online store depends heavily on the quality of the customer experience.
The payment process plays a central role, and trouble or inconvenience in this area can become a major factor that damages customer trust.

By using Shopify Payments, you can gain many benefits, but it is important to understand its characteristics and limitations properly and then choose the best settings and customization for your business model and target customers.

Finally, if you continue optimizing not only payment processing but also product quality, support, marketing strategy, and the overall operation of your online store, Shopify can reduce monthly costs compared with domestic e-commerce services while allowing you to build a very high-level site with flexible design, systems, and thousands of apps.

It also lets you operate an e-commerce site protected by a high-speed server and extremely strong security, so Kanahina highly recommends it!